First, like us, you are probably wondering, "What exactly is shrift, and how can I get more of it?"

Interestingly, use of the word "shrift" dates all the way back to Shakespeare'sRichard III, a play or something by the author Cliffs Notes, which was a sequel to the successful Richard and Richard II.

In modern times, however, "shrift" is simply a measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.

As you can see in the chart below, "shrift" these days is quite short.

The area in blue is known as the "Aether."

And as you can see, the Aether is crushing shrift, causing it to be very, very short.

But that's neither here nor there.

We're concerned about the Conference Board's Leading Economic Indicators (LEI).

Yesterday the Conference Board reported the LEI decreased 0.5%, the third decline in four months. What does that mean?

The LEI is an index measure of the economy's future course across 10 separate indicators.

Eight of the 10 indicators that make up the LEI index declined in April.

What you need to know is that the only two that increased were: 1) Stock Prices, and 2) Real Money Supply.

That makes it tough to be long shrift.

2. China Still Very Much Short Shrift

China's central bank said today that it will raise interest rates, increase banks' reserve requirements and let the yuan trade in a wider band against the dollar.

The People's Bank of China said it will widen the trading band of the yuan against the dollar to 0.5% above and below its central parity rate from 0.3%, effective Monday.

The central bank also raised benchmark deposit and lending rates.

The move to widen the trading band of the yuan is more symbolic than anything else.

In a statement, the PBoC said it would continue to maintain the basic stability of the yuan exchange rate.

that means the band has been widened, but the management of the yuan will likely remain in place.

The bank said the actions are aimed at strengthening liquidity management in the banking sector, maintaining reasonable growth in money supply and investment as well as maintaining stable price levels, according to XFN-Asia.

The moves are no doubt also intended to help quell stock speculation among China's growing base of retail investors.

In a related piece of news from yesterday, Li Ka-shing (rhymes with Ka-ching), China's richest person said China's stock valuations "must be a bubble" and that prices were likely to decline.

"Mr. Li has a reputation of making the right calls," said Kenny Tang, associate director at Tung Tai Securities in Hong Kong, the International Herald Tribune reported.

Like us, Mr. Li is apparently long shrift.

3. Shrift Hitting the Fan in Spain!

Here's an important story that's really gotten very little play short shrift here in the U.S.: Spain's foreign reserves have plummeted, leaving the country exposed to a possible banking crisis if the property market swings from boom to bust.

The Banco de Espana's holdings of foreign currencies and gold have fallen to €13.2 billion euro, according to The Telegraph (UK), a dangerously low level that is equivalent to 12 days of imports.

Total reserves have now fallen by two-thirds.

The article notes that over the past two months the Banco de Espana has sold 80 tons of gold (see chart below) and also reduced its holdings of US Treasuries, British Gilts and other investments.

"The Banco de España refused to comment on the sales, leaving it unclear why reserves have fallen so low, or where the money has gone," the Telegraph said.

But one look at the current account deficit provides a pretty clear answer: the current account deficit has ballooned to 9.5% of GDP, reaching €8.6 billion in January alone, the article notes.

Meanwhile, housing is showing signs of cracking in Spain (see Five Things, April 24).

According to Morgan Stanley, construction accounts for nearly 18% of GDP.

Household debt has reached 120% of disposable income.

Corporate borrowing is 100% of GDP.

Despite membership in the European Union, the ECB may only intervene if a banking crisis spreads across the eurozone, so effectively each country is left to its own devices.

And here's the kicker to the Spain story: Since the government cannot devalue its way out of trouble, it will have to deflate.

The shrift is about to hit the fan in Spain.

Gold, Past Two Months

EDITOR'S NOTE: The following two items do not use the word "shrift" in any way, shape or form.

4. Spare Us the Cutter!

The main story at the USA Today Online reveals the stress seeping out from between the cracks of the American 28-day revolving Dream with a low, low introductory rate of 0% for six months, but 18% thereafter with a $50 annual fee, $35 balance transfer fee and additional 3% cash advance fee.

But Americans are driving substantially fewer miles for the first time in 26 years because of high gas prices and demographic shifts, according to a USA TODAY analysis of federal highway data.

After 25 years of steady climbs, the growth in miles driven has leveled off dramatically in the past 18 months.

Miles driven in February declined 1.9% from February 2006 before rebounding slightly for a 0.3% year-over-year gain in March, the newspaper reported.

That's in sharp contrast to the average annual growth rate of 2.7% recorded from 1980 through 2005.

During the past 18 months, the nation's population and workforce have grown by just over 1% a year, so an annual gain of 0.3% indicates a decrease in miles per person.

On the bright side, there is at least one thing the American cost-cutter will soon be adding to virtually everything; the prefix (de-).

5. Latest Casualty of Financial Mania: Age-Appropriate Dress

Noticed an interesting article in the New York Times Style section yesterday lamenting the lack of age-appropriate dress for women over 40. And so financial mania claims another victim.

"If I heard an issue vocalized more often in the last year than the age-appropriate thing, I can't think what it was," writes fashion observer Cathy Horyn.

So what changed?, she asks. "Juvenility has mobbed us."

That's a pretty charged phrase; it contains at once a disruption of the concept of "youth" as a desired trait and attribute, and the notion of being mobbed, victimized by our own herding impulses that make the very concept of fashion possible in the first place.

After all, what is fashion but our herding impulses on display?

So what has changed?

"The choice is to wear something juvenile or be a total killjoy," Linda Wells, the editor of Allure, said with a laugh.

Indeed. The choice between embracing juvenility or succumbing to killyjoy-ism goes hand-in-hand with that engine of financial mania, denial, and that driver of major trend reversal, the point of recognition.

Denial versus Reality.

Apparently, one wears a baby-doll dress, a girlish necklace and long hair with little curls, while the other laments the demise of the pants suit.

"Susan Stone, who owns Savannah - where the customers are mostly over 40 - says the issue of age-appropriateness coincided with the demise of the pantsuit," Horyn writes.

The pants suit was part of the trend toward unisex clothing that began in the late 1960s and 1970s.

Interesting that up here at 2007 financial mania heights we would begin to lament the demise of the pants suit.

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